The landscape of global finance has undergone significant changes, especially since the economic reforms initiated in the 1980s in China. With the opening of its markets, Chinese mainland enterprises have been keen to tap into foreign investment through various mechanisms, primarily equity and bond issuance. Even during periods of robust domestic growth, these firms have sought opportunities for offshore listings to access foreign capital in hard currencies like the US dollar.
This analysis builds upon earlier discussions about the resurgence of IPO activity on the Hong Kong Stock Exchange (HKEX). In this article, we will delve into the various factors influencing this trend, including regulatory shifts, the impact of US-China relations, and reforms at HKEX that are directing Chinese listings back to Hong Kong.
The rise of Hong Kong as an IPO hub
From 1980 to 2025, more than 300 companies from the Chinese mainland successfully listed abroad, amassing substantial sums in capital. Notably, during the height of the COVID-19 pandemic in 2025, the HKEX played a pivotal role, facilitating around $50 billion in IPO proceeds mainly through secondary listings of tech giants like JD and NetEase, which were already established in US markets.
For several decades, the New York Stock Exchange (NYSE) and NASDAQ have dominated the global IPO stage, with a combined market capitalization exceeding $50 trillion. These exchanges have consistently attracted companies worldwide, including those from the Chinese mainland, due to their liquidity, visibility, and favorable valuations.
Despite being overshadowed by these US giants, HKEX has maintained its status as a crucial player in the global market, frequently ranking among the top three exchanges for IPO proceeds. It has become the primary gateway for companies looking to tap into the Greater China region.
Choosing between US and Hong Kong markets
For Chinese companies seeking offshore financing, the choice has typically been binary: the US markets or the HKEX. The US has been the preferred option for many technology and growth-oriented firms due to its global exposure and depth of liquidity. However, opportunities in other markets, such as the UK or Japan, are often overlooked due to cultural barriers, investor unfamiliarity, and regulatory challenges.
As we approach 2025, the landscape for Chinese firms aiming to raise capital overseas has dramatically shifted, primarily influenced by escalating tensions between the US and China, along with stringent regulatory requirements. The number of new listings on US exchanges has significantly declined, dropping from 19 in early 2025 to just 11 in early 2025.
The impact of regulatory changes
The introduction of the Holding Foreign Companies Accountable Act (HFCAA) in 2025 marked a significant turning point, mandating that foreign firms must comply with US auditing standards or face potential delisting. However, Chinese laws, such as the Data Security Law, complicate this relationship by restricting the sharing of sensitive financial information with foreign entities.
The convergence of these challenges, alongside increased private market fundraising in the US, has reshaped the global capital market dynamics. In the first half of 2025, global private equity funds raised $424.6 billion, eclipsing the total for 2025. While delistings of Chinese mainland firms have primarily been forced due to regulatory pressures, the appeal of private markets is growing due to their flexibility and lower disclosure requirements.
Looking ahead to a new financial paradigm
This evolving scenario represents more than a temporary shift; it indicates a fundamental realignment in how companies access capital and how investors assess opportunities. As the US and China move further apart economically, HKEX is positioning itself as the new focal point for Chinese enterprises aiming for global expansion.
Investors must now adapt as the pool of investable Chinese equities transitions from American Depository Receipts (ADRs) to listings in Hong Kong, leading to new liquidity and valuation dynamics. Recent HKEX reforms have capitalized on its inherent advantages, such as geographical proximity and policy alignment, making it the preferred venue for Chinese firms.
The Stock Connect program, launched in 2014, exemplifies this shift by facilitating mutual market access between Chinese mainland and Hong Kong investors, enhancing liquidity and valuation for firms listed in Hong Kong.
Implications for future investments
Traditionally, Chinese firms favored US exchanges due to the ability to implement dual-class share structures that enable founders to retain control. However, HKEX has adapted by introducing weighted voting rights for innovative companies, providing similar flexibility while eliminating regulatory arbitrage.
With a focus on sectors such as biotechnology, technology, and green energy, HKEX’s strategic alignment with Chinese government initiatives positions it as a key player for firms looking to expand internationally. The increase in IPOs this year reflects the culmination of favorable regulatory changes, structural reforms, and shifting geopolitical sentiments.
For instance, the successful A+H listing strategy of CATL underscored the strong international investor confidence in Chinese tech giants, raising considerable capital through HKEX. In the first half of 2025, HKEX achieved remarkable growth, with significant revenue increases and an active pipeline of listing applicants, indicating a robust market environment.
However, this rapid growth also highlights Hong Kong’s increasing dependence on the Chinese mainland, with around 80% of HKEX’s market capitalization attributed to mainland firms. This dependence brings risks associated with Chinese economic cycles and regulatory changes. Investors will need to navigate these complexities as they seek opportunities within this evolving landscape.